Ending the week this on Friday we have plenty of Employment data to finish with. For the first time in 3 months the US unemployment rate is expected to be downgraded to 6.4% from last month’s 6.3%. Last month’s figure blew expectations out of the water, as expectations were 6.6% and came out at 6.3%. Given that last month’s performance was fantastic for the US economy there should be support for the USD on a slightly weaker figure this month.
USD will sell off and subsequently devalue. However, Past performance would suggest an improvement in the unemployment; if the release comes out sub 6.4% there most probably will some upward movement in the USD against AUD.
Mario Draghi Governor of the European Central Bank (ECB) has made a historical monetary move to combat the low-flation problem. Since 2012, Draghi has sent warning signs out in regards to acting on the threat of deflation. Last month he said in an announcement that he will act next month if the inflation rate is not close to the ECB targets of 2%. Yesterday we found a struggling inflation rate for the Euro-zone as it came in sub 1%. As of last night, the ECB Bonds are now negative yielding. This will result in investors looking elsewhere for return and safety as investors now will have to pay the ECB to hold money with them, instead of getting a return.
In the long run investors are expecting the EURO to devalue. This should support the Euro-zone as an increase in exports and a decrease in imports generally comes from a devalued currency. This will stabilize the inflation rate, which in turn will create more domestic production and investment.